public institutions of higher education are experiencing a major
financial crisis that threatens their viability. The source of
this financial crisis is an imbalance between revenues and
spending/appropriations caused by
a combination of broader economic trends, Federal tax policy, and
Missouri's unique Constitution and fiscal policies.
Although the Consensus Revenue
Estimate provided by Missouri's Office of Administration and Senate
Appropriations Staff projects a 2.3% growth ($147.8 million) in general
FY2005 (Kruckemeyer and Blouin 2004, pp.2-3), Missouri's institutions
of higher education continue to suffer financially. For example,
state appropriations for higher education in FY 2003 and FY2004 were
by $140 million, but the FY2005 budget has restored only $23 million
2004, p.2). The Missouri Budget Project reports that there has
an average tuition increase of $1,700 for Missouri's four year
affecting 80,000 Missouri students (Kruckemeyer and Blouin 2004,
There can be no doubt that
Missouri, like other states, has been adversely affected by broader
economic trends and events. The recession in 2001, the collapse
of the dot com industry, the shock of 9/11, numerous corporate
scandals, the war in Iraq, the erosion of the manufacturing sector, and
massive job losses have all combined
to put downward pressure on state revenues. But it must be
recognized that these events aggravated the crisis, they did not cause
understand the crisis, we must look to structural factors.
One such factor involves changes
in Federal tax policies. President Bush signed three federal tax
cuts in his first term, reducing personal income taxes, corporate taxes
and estate taxes. Because Missouri pegs its own personal income
corporate tax and estate tax to the Federal tax, changes in Federal
are imported into the state. The Missouri Budget Project reports
that in FY 2005, changes in the Federal estate tax alone will reduce
tax revenues by $117 million (2004, p. 5). The Center on Budget
Policy Priorities reports that all told, Federal tax changes between
have cost Missouri $320 million, making Missouri the third most
affected state in the nation
(2004, p. 1). Obviously,
changes like these contribute significantly to the imbalance between
Factors unique to Missouri also
contribute to the crisis confronting higher education. These
include crucial amendments to the Missouri constitution. The
"Hancock Amendment," established in 1980, limits total state revenues
by linking them to personal income. The limit is set by
multiplying total state personal income by 5.64% (Moody 2003, p.
4). If state revenues surpass that limit, they must be refunded
to personal and corporate income taxpayers. Hancock was first
"triggered" in 1995, and from 1995-1999 over $980 million dollars were
refunded. In response to these increased state revenues, in the
second half of the 1990s legislators enacted 21 new tax credits and 14
new tax cuts. In the first year of their implementation, FY2000,
the tax credits cost the state $170 million while the tax cuts cost
another $648.1 million. In short, changes to Missouri's tax code
in a loss of $818.1 million dollars in FY2000, and have eroded its tax
by 11% annually (Missouri Budget Project 2004, p. 5).
In 1996 Missouri voters passed
the "Carnahan/Farm Bureau Amendment" which puts a ceiling on new tax
revenues tied to an annually adjusted percentage change in personal
income. In FY 2003 this limit was approximately $74.5 million
(Moody 2003, p. 5). Any combination of tax or fee increases that
exceeds this amount must
be approved by voters, even if it falls below the Hancock limitation.
The combination of these two
amendments puts Missouri's public sector in a precarious
Missouri, like most states, must balance its budget each year and
run deficits. In good economic times like the '90s when surplus
revenues were generated, "Hancock" required refunds and prompted tax
and credits. These tax cuts and credits became permanent features
of Missouri's tax code. In bad economic times, like the 2001
revenues fall and create an imbalance between spending commitments
of which were increased in the good times of the 90s) and falling
But, because of the "Carnahan/Farm Bureau Amendment", taxes and fees
be raised to meet the shortfall without a vote of the people.
the financial difficulties visited on many families during economic
the likelihood of adjusting the imbalance through revenue-increasing
is very small. The result is that the state must cut spending to
the budget, and that is the situation we find ourselves in right
Missouri's tax system is structured so that as the business cycle moves
up and down, the public sector gradually shrinks due to decreasing
While the revenue side of the
imbalance has been structured to reduce the revenue base for Missouri's
public sector, the spending side is structured so that higher education
appropriations are limited and/or reduced. Public higher
education in Missouri is funded from the general revenue fund.
K-12 education, corrections, and Medicaid also draw off this fund, and
spending on these programs affects the amount of revenue available for
In 1993 Missouri passed SB 380
which created a foundation formula for funding K-12 education.
Between FY1993 and FY2003 spending per pupil increased 12.9% per year,
over the ten year period. In terms of the imbalance, between
and FY2003 state aid for K-12 was $800 million while revenues declined
113.1 million (Moody 2003, p. 7).
Starting in the economically
prosperous times of September 1998, Missouri expanded Medicaid
to cover adults and children not qualified under AFDC or TANF.
increased the number of eligible recipients from 580,363 in September
1998 to 913,761 in October of 2002; an increase of 57.5% (Moody
p. 24). It should be noted that, once eligibility criteria are
Missouri must provide the funds for the services, and this puts
pressure on the general fund. In FY2003, Medicaid drew $703.1
from the general revenue fund (Moody 2003, p. 25).
Like Medicaid, Missouri's
Department of Corrections has also experienced dramatic increases in
expenses. Much of this is attributable to the current "get tough
on crime" sentencing policies that have swelled the number of people
incarcerated and on probation and parole. For example, between FY 1993
and FY2002 the probation and
parole caseload increased from 41,664 to 63,640, an increase of 52.7 %
(Moody 2003, p. 33). James Moody, a former state budget director,
estimated that in 2002 Missouri was incarcerating 4 to 5 new inmates a
day, which would require the state to build a new 1,596 bed prison each
year at a cost of $110 million per prison to accommodate these new
(Moody 2003, p. 34). Clearly, Missouri's sentencing policies
the general revenue fund. And, like Medicaid, once an individual
made "eligible" for corrections, the state is obligated to fund the
The structural problem underlying
the crisis in higher education is now evident. On the revenue
side, the "Hancock" and "Carnahan/Farm Bureau" amendments over time
tend to shrink the revenue base that funds Missouri's public higher
On the spending side, there are formulae (K-12 foundation formula,
Medicaid eligibility rules, and sentencing laws) that have increased
for K-12 education, Medicaid, and corrections. In 1981 Missouri
replaced its FTE-based funding formula for higher education with a
base-budget formula. In practice this means there is no formula
guiding spending for public higher education in Missouri. It is a
math problem of determining what's left after other programs have drawn
from the fund. The result: Missouri's state support for public
higher education has declined as a percentage
of the overall state budget from 8.3% in FY1980 to 6.8% in FY2000 to
in FY2003 (Keiser 2003, p.37). Higher education, which receives
only 15% from general revenue and lottery appropriations, took 65% of
the reductions between FY2002 and FY2004 (Keiser, p. i).
Consider the following additional
facts about Missouri's public institutions of higher education:
- Between 1991 and 2003, Full Time Equivalent (FTE) student
enrollment in Missouri's public colleges and universities declined by
more than 3%, while the national trend was an increase of 18.7%. MO is
one of only 3
states to have a FTE decline in this period (2003 SHEF Report, p.26).
- Missouri ranks second in the nation in tuition hikes in the last
two years (MNEA White Paper, July 2004).
- Missouri has the lowest per capita funding support for higher
education among the surrounding states: MO=$321, KS=$496, AR=$449,
OK=$477, IA=$507, IL=$411 (2003 SHEF Report, p. 41).
- Nationally, median student loan debt was $16,500 in 2003.
At Southwest Missouri State University the average student graduated in
2003 with $17,000 of student loan debt, an increase of 74% since 1997
Today 6/30/03; SMSU Office of Student Financial Aid).
Missouri's public institutions of
higher education are in peril and will remain so until our legislators
address the structural imbalance in the state budget. Although
current revenue estimates are better than the last few years, the
Missouri National Educational Association reports that there is still a
structural deficit of $650 million in the FY2005 budget (Fajen 2004, p.
7). It is time that students, faculty, and the public in general
understand this crisis and make their legislators address this
problem. The Missouri Conference of the AAUP is working hard to
promote this understanding so that Missouri's institutions of public
higher education have a solid and equitable financial base.
Center on Budget and Policy Priorities. 2004. "Passing Down the
Deficit: Federal Policies Contribute to the Severity of the State
Fiscal Crisis." http://www.cbpp.org/5-12-04sfp-mo.pdf
Fajen, Otto. 2004. "Missouri's Budget Crisis: The Impact of the
Structural Budget Deficit on Public Education." Missouri National
Education Association Whitepaper.
Keiser, John. 2003. Appropriations Request For Operations.
Springfield, MO: SMSU.
Keiser, John. 2004. "2005-6 Budget Request focuses on Three Key
Areas." SMSU Focus: 12:1.
Kruckemeyer, Tom and Amy Blouin. 2004. "Missouri's Revenue
Situation: Is the Fiscal Crisis Really Over?" Missouri Budget
Missouri Budget Project. 2004. "Missouri's Fiscal Crisis Remains
Severe: Revenue Option are Available as Compared to continued Spending
Moody, James R. 2003. Missouri's Budget Problem. Jefferson
City, MO: Moody & Associates
State Higher Education Executive Officers (SHEEO). 2004.
State Higher Education Finance FY2003 (SHEF Report).
This article was prepared during the Fall of 2004.
Double-Digit Tuition Increases in Public Higher
Ed Again This Year
According to a survey by the
College Board, tuition at public universities jumped by 10.5 percent
year. Tuition "now costs 46 percent more than when this year's
class entered high school," reported the Wall Street Journal
Not surprisingly, students are
working more jobs for longer hours and taking out more loans at higher
rates, just to keep in school. Four out of five students in
education hold jobs while they study, averaging 25 hours a week.
And to the delight of the banking industry, the fastest-growing student
loans are those with the highest interest rates.
But growing tuition and loan
costs aren't the only things pushing working-class sons and daughters
out of higher education. Increasingly, institutions are walking
from policies that once used financial need as the criterion for
Now it's based on "merit," a code word for more subsidies for the
wealthy. "The biggest increase in institutional aid has been to
the upper-income families," confesses an analyst for the College Board.
This article is excerpted by permission from the Labor Party Press,
January/February 2005, p. 3. Labor Party Press is the official
news publication of the Labor Party, a political party formed by
progressive unions (http://www.thelaborparty.org
). The Labor Party's campaign for Free Higher Education has been
endorsed by the Collective Bargaining Congress of AAUP. Its
Here are three AAUP events that
faculty should consider attending. The first is the annual
meeting of the Missouri State Conference, which will be held at Lincoln
University in Jefferson City on March 5 (first day of Spring
Break). The agenda isn't out yet, but a central issue will be the
Missouri education budget. For further information contact John
Harms, President of the Missouri State Conference, firstname.lastname@example.org
The second is the ninety-first
Annual Meeting of the AAUP, June 9-12 in Washington, D.C. This
year's topic is "Academic Freedom and National Security." For
more information see the January-February issue of Academe
8, or go to the organization's website--http://www.aaup.org
The third event is the national
AAUP Summer Institute, which will be held this year at the University
of New Hampshire from July 21-24. The Institute provides
workshops on a number of issues of great interest to AAUP chapters,
including governance issues, academic freedom, recruiting, and faculty
handbooks. It is also a great place to exchange experiences and
ideas. Watch the AAUP web page (
) for information.
The entire contents
of each issue of The Faculty Advocate
(except for public domain
material) is copyrighted. The Faculty Advocate
2005, Copyright 2005 by the UMKC Chapter of the American Association of
University Professors. All rights returned to authors upon
publication. AAUP chapters, state conferences, and the national
organization have permission to reproduce and distribute.
Permission for other non-profit publishers is a formality, but UMKC
AAUP asks them for the courtesy of requesting it. Contact the
Editor, Patricia Brodsky: 816-235-2826, e-mail: email@example.com